In a statement issued yesterday, the UK Payments Council said that "cheques will continue for as long as customers need them" and confirmed that the closure of the cheque-clearing facility in 2018 "has been cancelled".

The announcement marks a reversal of the council's December 2009 decision to phase out cheques by October 2018, which was said to be in response to the "long-term terminal decline" of cheque payments.

Richard North, chairman of the Payments Council, said: "It's in the DNA of the Payments Council to consult and listen to all those people who actually make payments and use cheques. Listening to over 600 stakeholder groups, working with the banks and following our appearance before the Treasury Select Committee, we have concluded we should reassure customers that the cheque is staying.

"Over the last two years we have learnt a great deal about what is important to our many stakeholders and we are really grateful to all of those groups and individuals who took the time to talk to us and help us reach this decision. We will use what we've learnt to keep improving existing systems, as well as introducing innovation, so that customers benefit from 21st century ways to pay. Innovation must be at the heart of what we do."

The decision resulted from the lack of a viable paper-based alternative to cheques, which the Payments Council had identified as a requirement for going ahead with the phase-out.

In a recent statement to the Treasury Select Committee, the Payments Council said that "until we have in place a paper-based solution that has the flexibility and ease of use of cheques...we should not be abolishing cheques".

Work developing an alternative began in 2010 with the aim of identifying the best option by September 2011, with a fully-costed proposal due to be considered in December 2011.

However, the Payments Council said that it had "concluded early that this is no longer the best option and retaining the cheque is a better approach".